Best Buy Sinks On Weaker-Than-Expected Holiday Sales

Best Buy (BBY) stock plummeted more than 25% on Thursday after the consumer electronics retailer reported weaker-than-expected U.S. holiday sales, casting doubt on the company's turnaround efforts.

Best Buy said domestic same-store sales fell 0.9%, despite heavy discounting to draw in customers. For the nine weeks ended Jan. 5, Best Buy took in U.S. revenue of $9.75 billion, down 1.5% from the year-earlier period. The retailer's international sales fell 0.8% to $1.7 billion in the holiday quarter.

"When we entered the holiday season, we said that price competitiveness was table stakes and an intensely promotional holiday season is what unfolded," Best Buy CEO Hubert Joly said in a statement. "The promotional intensity that began with Black Friday continued throughout the period, which led us and our competitors to answer one question — do we make the incremental investment necessary to be price competitive and defend our market share? For us, there was only one answer. To advance our Renew Blue transformation, it was imperative that we live up to our customer promises — and one of these promises is to offer our customers competitive prices."

The price cuts impacted Best Buy's profit. It lowered its gross profit margin estimates for the quarter.

"Our holiday revenues were negatively impacted by a number of factors, including: (1) the aggressive promotional activity in the retail industry during the holiday period, which we believe did not result in higher industry demand and had a deflationary impact on our revenue; (2) supply constraints for key products; (3) significant store traffic declines between 'Power Week' and Christmas; and (4) a disappointing mobile phone market," Joly said.

Among the products in short supply this holiday season were new game consoles from Microsoft (MSFT) and Sony (SNE) and Apple's (AAPL) iPad Mini with Retina display.

In response to the holiday season results, Best Buy is taking a number of actions, Joly said. In fiscal 2015, which begins in early February, the company plans to further lower its cost structure, increase its online business at an accelerated pace, and improve Best Buy's "multichannel customer experience."

Best Buy's U.S. online sales rose 23.5% to $1.32 billion in the nine-week period.

Best Buy also plans to improve customer targeting and personalization, as well as reinvigorate and grow its Geek Squad services business.

The store chain saw growth in computers, appliances and video games last quarter, but those gains were more than offset by declines in digital imaging, movies and MP3 players.

Best Buy stock was down nearly 28% in morning trading in the stock market today, near 27.15, a nearly eight-month low.

Best Buy (BBY) stock plummeted more than 25% on Thursday after the consumer electronics retailer reported weaker-than-expected U.S. holiday sales, casting doubt on the company's turnaround efforts.

Best Buy said domestic same-store sales fell 0.9%, despite heavy discounting to draw in customers. For the nine weeks ended Jan. 5, Best Buy took in U.S. revenue of $9.75 billion, down 1.5% from the year-earlier period. The retailer's international sales fell 0.8% to $1.7 billion in the holiday quarter.

"When we entered the holiday season, we said that price competitiveness was table stakes and an intensely promotional holiday season is what unfolded," Best Buy CEO Hubert Joly said in a statement. "The promotional intensity that began with Black Friday continued throughout the period, which led us and our competitors to answer one question — do we make the incremental investment necessary to be price competitive and defend our market share? For us, there was only one answer. To advance our Renew Blue transformation, it was imperative that we live up to our customer promises — and one of these promises is to offer our customers competitive prices."

The price cuts impacted Best Buy's profit. It lowered its gross profit margin estimates for the quarter.

"Our holiday revenues were negatively impacted by a number of factors, including: (1) the aggressive promotional activity in the retail industry during the holiday period, which we believe did not result in higher industry demand and had a deflationary impact on our revenue; (2) supply constraints for key products; (3) significant store traffic declines between 'Power Week' and Christmas; and (4) a disappointing mobile phone market," Joly said.

Among the products in short supply this holiday season were new game consoles from Microsoft (MSFT) and Sony (SNE) and Apple's (AAPL) iPad Mini with Retina display.

In response to the holiday season results, Best Buy is taking a number of actions, Joly said. In fiscal 2015, which begins in early February, the company plans to further lower its cost structure, increase its online business at an accelerated pace, and improve Best Buy's "multichannel customer experience."

Best Buy's U.S. online sales rose 23.5% to $1.32 billion in the nine-week period.

Best Buy also plans to improve customer targeting and personalization, as well as reinvigorate and grow its Geek Squad services business.

The store chain saw growth in computers, appliances and video games last quarter, but those gains were more than offset by declines in digital imaging, movies and MP3 players.

Best Buy stock was down nearly 28% in morning trading in the stock market today, near 27.15, a nearly eight-month low.

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